October 9th, 2020 9:30 AM by Richard Sardella MLO.100007700/NMLS 233568
At the start of the day, stock indexes were trading better, the 10 yr. note at 0.78% unchanged, and MBS prices were a little weaker.
Stimulus talks are not dead but are on life support. The administration is again leaning toward a large-scale stimulus bill after Pelosi pushed back on the idea of individual measures for parts of the economy hit by the Covid-19 crisis. The news is reporting that Mnuchin told Pelosi in a 40-minute call that President Donald Trump wants agreement on a comprehensive stimulus package.
Mortgage rates remained flat last week and this week. It is not much of a stretch to believe mortgage rates have found a bottom and not likely to fall more. The 10 yr. isn't likely to decline; if anything, the 10 yr. has a better chance of increasing than falling. We hold that the housing sector will continue to be strong into 2021 with still historically low mortgage rates. Based on historical relationships, mortgage rates should be lower than they are with the decline in the 10 yr. note rate; the thing is, at these low treasury rates, MBSs will add an increase for risk that has to be there to attract investors.
The National Mortgage News reporting lenders continued to tighten mortgage credit in September, not just because of broader economic concerns, but also because they had to remove certain Libor-indexed adjustable-rate loans from their menus. The MBA's Mortgage Credit Availability Index fell to 118.6 in September, compared with 120.9 in August and 183.5 in September 2019. This is the MCAI's lowest level since February 2014. The 1.9% overall month-to-month reduction included a 9.5% decline in the conforming loan segment as mortgage originators discontinued offering Libor ARMs. Fannie Mae and Freddie Mac had set a Sept. 30 cut-off date for borrowers to apply for these loans. According to the latest data available from Ellie Mae, the share of conventional ARMs originated fell to 1.9% in August from 5.2% in January.
At 9:30 am ET, the DJIA opened 128, NASDAQ +64, S&P +18. 10 note 0.78% unchanged. FNMA 2.0 30 yr. coupon at 9:30 am -6 bps from yesterday's close, and -11 bps from 9:30 am yesterday.
No market-moving data today; at 10:00 am ET August preliminary wholesale inventories was expected +0.5%, as released +0.4%.
Our technicals are still bearish on the 10 yr. note. It broke above support three days ago, and while not increasing, its yield has remained above the previous support increasing the potential of more to come. When it broke above 0.74%, our forecast was 0.80% for the first support; it is close at 0.79% hit three times since Tuesday.
The bond and mortgage markets will be closed on Monday for Columbus Day.
PRICES @ 10:00 AM ET
10 yr. note: 0.77% -1 bp
5 yr. note: 0. 33% -2 bp
2 Yr. note: 0.15% -1 bp
30 yr. bond: 1.58% -1 bp
Libor Rates: 1 mo. 0.146%; 3 mo. 0.220%; 6 mo. 0.246%; 1 yr. 0.349% (10/8/20)
30 yr. FNMA 2.0: @9:30 103.19 -5 bp (-11 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 104.73 -2 bp (-8 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.19 -34 bp (-43 bp from 9:30 yesterday)
Dollar/Yuan: $6.6968 -$0.0934
Dollar/Yen: 105.80 -0.23 yen
Dollar/Euro: $1.1804 +$0.0043
Dollar Index: 93.21 -0.39
Gold: $1925.10 +$30.00
Crude Oil: $41.05 -$0.13
DJIA: 28,489 +64
NASDAQ: 11,509 +88
S&P 500: 3464 +17
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.